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The commercial benefits of open innovation

The allure of open innovation can often appear counter-intuitive. After all, if you’re giving away your ideas or inviting people into the innovation process, aren’t you giving away your crown jewels or admitting you don’t have the answers yourself?

Some research last year highlighted the benefits of opening up and sharing ones intellectual property with the world. Their findings revealed that by opening up the original innovation to further research helps to stimulate demand for the product, whilst at the same time enabling it to evolve more rapidly.

So whilst the company may lose a bit of market share as other companies build on the original innovation, the process of doing this makes the entire market larger, therefore benefiting the original innovator more than if they had kept things to themselves.

A Dutch study has built upon these findings, revealing that companies that tap into external sources for research and development perform significantly better on innovation than those that keep everything in house.

Researcher Luca Berchicci from RSM Erasmus University found that there is an optimum point, beyond which there is no further gain to be had from opening up to the crowd. He believed that sweet spot to be around 34% of investment. Whilst it would be foolish to assume that R&D budgets should be radically re-drawn, it does show that many organisations are continuing to under-utilise the crowd in their innovation efforts.

Whilst ideation has become a popular use of open innovation, there is as yet little evidence that organisations are using crowd based insights further along than that, for instance when the idea is in the development stage.

I wrote a series of posts recently looking at various stages of the open innovation process that may be useful if you are looking to go down this path. Check them out below.